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COVID-19 Business Interruption Effects on Business Continuity

Business Continuity Planning Tips for Mitigation

COVID-19 HAS LED TO CRITICAL SUPPLY CHAIN DISRUPTIONS

In the last quarter of 2019, the Novel Coronavirus COVID-19 developed in the Wuhan province of China and has since disrupted economic and social aspects of life around the globe. Since the start of the outbreak, supply chains are facing increased disruptions, affecting manufacturers and consumers around the globe.

In a survey conducted by the Institute of Supply Management (ISM) in February 2020, nearly 75% of companies have experienced disruptions to their supply chains due to the outbreak of COVID-19 and 80% of companies believe that their business will experience an economic impact. Of that number, 16% of companies have reported that they’ve adjusted revenue targets downward on an average of almost 6% due to this situation, though some companies report that it can be as much as 15%.

Other key supply chain findings of the survey include:

  • 57% of companies surveyed have reported on longer lead times from tier-1 China-sourced components, with average lead times doubling (if not more) since last year
  • China manufacturers have reported on operating at 50% capacity and 56% of normal personnel
  • Over 60% of companies surveyed have experienced delays in receiving orders from China and over 50% are having difficulty in gaining supply chain information from China
  • More than 44% of companies surveyed responded that they do not have a BCP plan in place to address these recent supply chain disruptions

BUSINESS INTERRUPTION ACROSS INDUSTRIES

Possibly one of the most visual industries impacted by the COVID-19 outbreak has been the aviation industry. With borders closing, travel advisories being released, and personal and business travel being cancelled, airlines are being forced to ground flights, issue refunds and critical trimming of schedules. According to trade group, International Air Transport Association (IATA) it is estimated that the aviation industry could lose up to $113 billion this year, mostly attributed to the coronavirus situation.

Other key industries that are seeing the negative effects of the pandemic include the restaurant and bar industry, retail, healthcare, electronics manufacturing and more. As people are forced to avoid public places, shopping malls, and corporate business centers, spending is expected to go down across industries, and a rolling recession can be expected as a result.

BUSINESS CONTINUITY PLANNING KEEPS YOUR BUSINESS ON TRACK DURING A PANDEMIC CRISIS

As seen through the ongoing pandemic, companies that are unprepared for a disaster are less likely to survive one, regardless of the company’s economic condition or insurance program. Identifying business interruption risks, quantifying the potential impacts to your company, developing mitigation strategies, and preplanning prior to a situation such as COVID-19 are the critical to managing risk. These tasks are generally referred to as Business Impact Analysis (BIA) and Business Continuity Planning (BCP). Vulnerability to both supply chain risk and a Pandemic Crisis are included in this analysis.

A comprehensive Enterprise Risk Management (ERM) and BCP plan includes:

Stage 1: Business interruption risk identification risk assessment & readiness

This stage includes:

  • Determining the status of emergency response planning
  • Identifying current status of corporate crisis communication infrastructure
  • Identifying primary business continuity risks
  • Identifying supply chain resources and processes
  • Analysis and identification of critical suppliers and their potential impact
  • Discussion of strategies to reduce risk

Stage 2: BCP Documentation

Stage 2 includes creating, developing and documenting a well-organized BCP document that includes all information and strategies gathered in Stage 1. Key strategies will include clear guidelines on what company resources should be engaged based on a critical event, analysis of supply chain resources, development of back-up plans, and definition of roles and responsibilities of key personnel.

Stage 3: Updating of BIA Information

Once a company BIA Model has been established:

  • Rules should be established for maintaining/updating information
  • Initial evaluations should be conducted when needed
  • Loss prevention service providers should document changes and facilities that would affect BIA’s
  • Loss prevention service providers should thoroughly review facility BIA documents, comment on status and make recommendations when needed
  • Annual communication with critical company risk management and support functions should be establishe.

LEARN MORE FROM OUR EXPERTS

TÜV SÜD Global Risk Consultants (GRC) experts are trained to help your company prepare for business interruption impacts from the COVID-19 crisis, natural disasters, and other causes of disruption. Our experts will use our knowledge of your company, industry, equipment, production bottlenecks, and exposures as the key components of the BCP process to help your company stay prepared and get back on your feet if a disruption does occur.

[1] Institute for Supply Chain Management. “COVID-19 Survey: Impact on Global Supply Chains.” ISM. 11 Mar 2020.
[1] Pearce, Brian. “COVID-19: Updated impact assessment of the novel Coronavirus.” IATA. 5 Mar 2020.
[1] Conerly, Bill. “Rolling recessions are the likely economic impact of new Coronavirus and COVID-19.” Forbes. 10 Mar 2020.

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